Accounting Policies of Krishna Ferro Products Ltd. Company

Mar 31, 2012

1) Basis of preparation

i) The financial statements are prepared in accordance with Generally accepted accounting Principles (GAAP) under the Historical cost convention on the accrual basis and on a going concern basis. GAAP comprises mandatory accounting standards as prescribed by the Companies (Accounting Standards) Rules, 2006, the provision of Companies Act, 19S6 and Guidelines issued by the Securities and Exchange Board of India (SEBI).

ii) The financial statements for the year ended March 31, 2011 had been prepared as per the applicable, pre-revised schedule VI to the Companies Act, 19S6. Consequent to the notification of revised schedule VI under the Companies Act 19S6, the financial statement for the year ended March 31, 2012 are prepared as per the revised schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year's classification. The adoption of revised schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.

2) Use of Estimates

The preparation of financial statements requires management to make certain estimates and assumptions that affect the amount reported in the financial statements and notes thereto. Differences between actual results and estimates are recognized in the period in which they materialize.

3) Depreciation/ Amortization

Depreciation is provided in accordance with Section 20S read with Schedule XIV of the companies Act, 19S6 on straight-line method.

Software/Licenses are amortized over six years on straight line basis.

4) Inventories

Inventories are valued at cost or net realisable value whichever is lower.

i) In respect of raw material and store & spares cost include expenses incidental to procurement of the same and computed on FIFO basis.

ii) The Cost of finished goods and Work in progress include raw material Cost, direct Cost of Conversion and proportionate allocation of indirect costs incurred in bringing the inventory to their present location and Condition.

Excise duty is included in the value of finished goods and is net of credit under Cenvat.

5) Investments

Investments are either classified as current or long term based on the Managements intention. Current investments are carried at the lower of cost and fair value. Long term investments are carried at cost and provision recorded to recognize any decline, other than temporary, in the carrying value of each investment.

6) Excise Duty

Excise duty payable on products is accounted for at the time of despatch of goods from the factories but is accrued for stock held at the year end.

7) Foreign Currency Transactions

Transactions in foreign currency are recorded at the exchange rate prevailing on the date of transaction.

8) Sales

Sales of goods are recognized at the point of despatch to the customer. Sales includes excise duty, sales Tax and entry tax

9) Employee Benefits

(a) Short term employee benefit obligations are estimated and provided for.

(b) Post employment benefits and other long term employee benefits:

Defined contribution plans:

Company's contribution to provident fund, employee state insurance are determined under the relevant schemes and/or statute and charged to revenue.

Defined benefit plans;

Company's liability towards gratuity, is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.

10) Fixed Assets

Fixed assets are stated as cost less accumulated depreciation. Cost is inclusive of freight, duties, levies and any Cost directly attributable to bringing the assets to their present location and working conditions for intended use.

11) Intangible Assets

Intangible assets are recognized on straight line basis over its useful economic life.

12) Taxation

Current tax is determined as the amount of tax payable in respect of taxable income for the period based on applicable tax rate and laws.

Deferred tax is recognised subject to consideration of prudence in respect of deferred tax asset on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent period and is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realization.

13) Borrowing Cost

Borrowing costs relating to acquisition or construction of fixed assets which takes substantial period of time to get ready for its intended use are included in the cost of fixed assets to the extent they relate to the period till such assets are ready to be put to use. Other Borrowing costs are recognized as an expense in the year in which they are incurred.

14) Impairment of Assets

Impairment of individual assets/cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss if any, is determined and recognized in accordance with the Accounting standard (AS28) issued in this regard by The Institute of Chartered Accountants Of India.

15) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a. The company has a present obligation as a result of past event.

b. A probable outflow of resources is expected to settle the obligation and

c. The amount of the obligation can be reliably estimated.

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.

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Mar 31, 2011

1) Basis of preparation

The financial statements are prepared in accordance with Generally accepted accounting Principles (GAAP) under the Historical cost convention on the accrual basis and on a going concern basis. GAAP comprises mandatory accounting standards as prescribed by the Companies (Accounting Standards) Rules, 2006, the provision of Companies Act, 1956 and Guidelines issued by the Securities and Exchange Board of India (SEBI).

2) Use of Estimates

The preparation of financial statements requires management to make certain estimates and assumptions that affect the amount reported in the financial statements and notes thereto. Differences between actual results and estimates are recognized in the period in which they materialize.

3) Depreciation

Depreciation is provided in accordance with Section 205 read with Schedule XIV of the companies Act, 1956 on straight-line method.

4) Inventories

Inventories are valued at cost or net realisable value whichever is lower.

i) In respect of raw material and store & spares cost include expenses incidental to procurement of the same and computed on FIFO basis.

ii) The Cost of finished goods and Work in progress include raw material Cost, direct Cost of Conversion and proportionate allocation of indirect costs incurred in bringing the inventory to their present location and Condition. Excise duty is included in the value of finished goods and is net of credit under Cenvat.

5) Investments

Investments are either classified as current or long term based on the Managements intention. Current investments are carried at the lower of cost and fair value. Long term investments are carried at cost and provision recorded to recognize any decline, other than temporary, in the carrying value of each investment.

6) Excise Duty

Excise duty payable on products is accounted for at the time of dispatch of goods from the factories but is accrued for stock held at the year end.

7) Foreign Currency Transactions

Transactions in foreign currency are recorded at the exchange rate prevailing on the date of transaction.

8) Sales

Sales of goods are recognized at the point of despatch to the customer. Sales includes excise duty, sales Tax and entry tax

9) Employee Benefits

(a) Short term employee benefit obligations are estimated and provided for.

(b) Post employment benefits and other long term employee benefits: Defined contribution plans: Company's contribution to provident fund, employee state insurance are determined under the relevant chemes and/or statute and charged to revenue. Defined benefit plans: Company's liability towards gratuity, is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.

10) Fixed Assets

Fixed assets are stated as cost less accumulated depreciation. Cost is inclusive of freight, duties, levies and any Cost directly attributable to bringing the assets to their present location and working conditions for intended use.

11 A Intangible Assets

In accordance with AS-26 on Intangible Assets, expenditure on "technical know-how (development expenses)" has been amortized over the useful life of the asset.

12 A Taxation Current tax is determined as the amount of tax payable in respect of taxable income for the period based on applicable tax rate and laws.

Deferred tax is recognised subject to consideration of prudence in respect of deferred tax asset on timing differences being the difference between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent period and is measured using tax rates and laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred tax assets are reviewed at each Balance Sheet date to re-assess realization.

13 A Borrowing Cost

Borrowing costs relating to acquisition or construction of fixed assets which takes substantial period of time to get ready for its intended use are included in the cost of fixed assets to the extent they relate to the period till such assets are ready to be put to use. Other Borrowing costs are recognized as an expense in the year in which they are incurred.

14 A Impairment of Assets

Impairment of individual assets/cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss if any, is determined and recognized in accordance with the Accounting standard (AS28) issued in this regard by The Institute of Chartered Accountants Of India.

15 A Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a. The company has a present obligation as a result of past event.

b. A probable outflow of resources is expected to settle the obligation and

c. The amount of the obligation can be reliably estimated.

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.

Contingent Liability is disclosed in the case of :

a) The company has a present obligation as a result of past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) A possible obligation, unless the probability of outflow of resources is remote. Contingent Assets are neither recognized nor disclosed.

16. Share allotment money receivable against the public issue of 1994-95 of the company is under reconciliation.

17. Previous year figures have been regrouped and rearranged wherever necessary.

18. Cash credit from SBI is secured against hypothecation of stock, bills and personal guarantee of directors. Raw material assistance from NSIC is secured by bank guarantee of SBI.

19. Term Loan from SBI is secured against Equitable mortgage of factory land and building and pledge/ hypothecation of plant and machineries and other fixed assets of the company.

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Mar 31, 2010

1) Basis of preparation

The financial statements are prepared in accordance with Generally accepted accounting Principles (GAAP) under the Historical cost convention on the accrual basis and on a going concern basis. GAAP comprises mandatory accounting standards as prescribed by the Companies (Accounting Standards) Rules, 2006, the provision of Companies Act, 1956 and Guidelines issued by the Securities and Exchange Board of India (SEBI).

2) Use of Estimates

The preparation of financial statements requires management to make certain estimates and assumptions that affect the amount reported in the financial statements and notes thereto. Differences between actual results and estimates are recognized in the period in which they materialize.

3) Depreciation

Depreciation is provided in accordance with Section 205 read with Schedule XIV of the companies Act, 1956 on straight-line method.

4) Inventories

Inventories are valued at cost or net realisable value whichever is lower.

i) In respect of raw material and store & spares cost include expenses incidental to procurement of the same and computed on FIFO basis.

ii) The Cost of finished goods and Work in progress include raw material Cost, direct Cost of Conversion and proportionate allocation of indirect costs incurred in bringing the inventory to their present location and Condition.

iii) Excise duty is included in the value of finished goods and is net of credit under Cenvat.

5) Investments

Investments are either classified as current or long term based on the Managements intention. Current investments are carried at the lower of cost and fair value. Long term investments are carried at cost and provision recorded to recognize any decline, other than temporary, in the carrying value of each investment.

6) Excise Duty

Excise duty payable on products is accounted for at the time of despatch of goods from the factories but is accrued for stock held at the year end.

7) Foreign Currency Transactions

Transactions in foreign currency are recorded at the exchange rate prevailing on the date of transaction.

8) Sales

Sales of goods are recognized at the point of despatch to the customer. Sales includes excise duty, sales Tax and entry tax.

9) Employee Benefits

(a) Short term employee benefit obligations are estimated and provided for.

(b) Post employment benefits and other long term employee benefits:

Defined contribution plans :

Companys contribution to provident fund, employee state insurance are determined under the relevant schemes and/or statute and charged to revenue.

Defined benefit plans :

Companys liability towards gratuity, is actuarially determined at each balance sheet date using the projected unit credit method. Actuarial gains and losses are recognised in revenue.

10) Fixed Assets

Fixed assets are stated as cost less accumulated depreciation. Cost is inclusive of freight, duties, levies and any Cost directly attributable to bringing the assets to their present location and working conditions for intended use.

11) Intangible Assets

In accordance with AS-26 on Intangible Assets, expenditure on "technical know-how (development expenses)" has been amortized over the useful life of the asset.

12) Taxation

Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act, 1961.

13) Deferred Tax

In accordance with accounting standard 22 - Taxes on income, deferred tax is recognized, subject to consideration of prudence, being the difference between accounting & taxable income that originate in one year and are capable of reversal in subsequent year

14) Borrowing Cost

The borrowing cost that are attributable to the acquisition of qualifying asset are capitalized up to the period such assets are ready for its intended use. All other borrowing cost are charged to profit & loss account.

15) Impairment of Assets

Impairment of individual assets/cash generating unit (a group of assets that generates identified independent cash flows) are identified using external and internal sources of information and impairment loss if any, is determined and recognized in accordance with the Accounting standard (AS28) issued in this regard by The Institute of Chartered Accountants Of India.

16) Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation,

if

a. The company has a present obligation as a result of past event.

b. A probable outflow of resources is expected to settle the obligation and

c. The amount of the obligation can be reliably estimated.

Reimbursement expected in respect of expenditure required to settle a provision is recognized only when it is virtually certain that the reimbursement will be received.

Contingent Liability is disclosed in the case of:

a) The company has a present obligation as a result of past event, when it is not probable that an outflow of resources will be required to settle the obligation.

b) A possible obligation, unless the probability of outflow of resources is remote. contingent Assets are neither recognized nor disclosed.